The key to understanding President Obama’s new plan to cut taxes for the middle class is the great wage slowdown of the 21st century.
Wages and incomes for most Americans have now been stagnant for 15 years. They rose at a mediocre pace for much of President Bush’s tenure in the 2000s, before falling sharply during the financial crisis that dominated the end of his presidency. Mr. Obama helped break the back of the crisis, but the recovery on his watch has been decidedly mediocre, too — especially in terms of paychecks.
Even as job growth has picked up in recent months, wages haven’t grown much more quickly than inflation. As a result, the government’s official statistics suggest that the typical American household makes no more than the typical household did in the final years of the 20th century.
That’s remarkable. There is little modern precedent for a period of income stagnation lasting as long as this one. Official records don’t exist before World War II. But the best estimate is that the Great Depression may be the only other modern time in which incomes for most households in the United States have grown so slowly — or not at all — for so long.
Source: New York Times/David Leonhardt